VideoNuze Posts

Today, I'm pleased to welcome the first post from Colin Dixon, Practice Manager, Broadband Media at The Diffusion Group, who is also a longtime industry executive.

I also want to highlight that as part of The Diffusion Group's 4th anniversary today, it is offering a special promotion for new clients of 4 reports for $4,000 (reports are usually $2,500 apiece) which also includes a 30 minute consult with founder/principal analyst Michael Greeson. The opportunity will be available for 4 hours, 4 minutes, from 12 noon U.S. Central Time today. Enjoy!

BBC's iPlayer a Model for U.S. Networks?

by Colin Dixon, The Diffusion Group

There's a lot of angst in Hollywood at the moment over broadband video. With video advertising models online in their infancy, the content providers are rightfully concerned about cannibalizing their linear channel ad revenue for unproven broadband models. Will eyeballs follow if a content provider puts all of its shows online? What's the right balance between too little and too much online content? With the variable quality of broadband connections, should a viewer be able to download the show for free rather than streaming it? Questions such as these are the source of much hand-wringing.

But what would happen if a major network were to throw caution to the wind and put everything they broadcast online and let their viewers download the shows for free to watch when and where they liked? Perhaps we can learn some lessons from the UK where the BBC, unfettered by the profit motive, is doing just that.

Late last year the BBC released its iPlayer through broadband connections to the British public. This proprietary client, available on PCs and iPods throughout the UK, makes available for free download every show broadcast on all of the BBC's many radio and television channels. Once downloaded, a show can be watched, ad free, anytime over the following 30 days (although once you start to watch a show, you have 7 days to finish viewing it.)

The British public, apparently, love it. In January, they downloaded some 11 million shows with usage of the service peaking at over a half million downloads in one day. Over 2 million people are perfectly comfortable relaxing in front of the PC catching up with the latest episode of "Doctor Who" or "EastEnders." And because the show is downloaded, not streamed, the quality is always great and the shows can be watched when and where it's convenient.

But perhaps this is just a British thing. Surely the same rules don't apply to the US market? Far from it. As we found when we surveyed broadband video users, there is strong evidence that US users will embrace online delivery with the same fervor as their UK brethren. When we surveyed nearly 2000 US broadband users, we found that 40% were watching an hour or more of broadband video. More amazing still is that 12% of broadband users were watching 25% or more of their television online. If you have a teenager in your home, I'm sure this will not come as a surprise to you!

Numbers like this are noteworthy in themselves. But it's important to remember that, in comparison to the BBC's iPlayer, the online viewing experience in the US is a mess. Shows are scattered over multiple websites and free ad supported show downloads are rare indeed. Broadband video viewing is an incredibly variable, often frustrating experience. What is clear is that given the same circumstances, the BBC's experience is likely to be repeated here.

The message for US content providers is clear: if you put it all online for free, and let people download and watch whatever, wherever and whenever they want, the eyeballs will follow. But with large numbers of people already devoting 25% or more of their TV viewing online, the issue of cannibalizing existing linear broadcast ad revenues is rapidly becoming irrelevant. The ad revenues will migrate to the Internet anyway!

One can only speculate what can happen when, as we predict for 2011, there are over 100 million households worldwide that are watching broadband video not from their PCs, but from broadband-enabled TVs.

What do you think? Post a comment and let everyone know!

I frequently hear the same segmentation framework used to describe today's broadband video providers. Between the small group of premium providers (e.g. broadcasters) and user-generated sites (e.g. YouTube), lie the so-called "mid-tail" (in "Long Tail" terminology) providers such as newspapers, magazines, online publishers, and indie producers. BobVila.com is a perfect example of a mid-tail provider. Dan Newberry, the company's VP Advertising and Marketing, who I recently spoke with, discussed these opportunities and challenges.

Some of you may know that Bob Vila hosted a hugely popular PBS program from 1979-1989 called "This Old House." He then set up his own production company and produced 2 syndicated shows, "Bob Vila's Home Again" and "Bob Vila." At the end of the latter's run, he decided to shift his focus exclusively to online, to his BobVila.com web site which had been growing since the Internet's earliest days.

As Dan explains, one of the motivations (in addition to Bob Vila's personal reasons) was the improving climate for online advertising in general and video advertising in particular. The economics of creating quality programming for TV vs. for online, plus the CPMs available online, made the case for shifting to online only. The site now generates 1.7 million unique visitors/mo and 600K-700K video streams/mo, with 1,700 video clips available.

Responding to its audience's desires, BobVila.com now produces 5-7 minute step-by-step how-to videos for the site. It has created about 100 since June '07. While broadband enables this new model, Dan is clear about the challenges.

First and foremost is making the financial equation work. This involves producing videos on a disciplined budget and maximizing ROI. Their target cost to produce each video is $4-5K, which requires a different approach than with TV production. Given current viewership and CPMs, Dan calculates that break-even on an individual video is projected at 24 months.

To monetize their video, BobVila.com uses an internal sales team and is able to generate pre-and mid-roll CPMs in the $25-40 range. If there's unsold inventory then it uses a network to sell it, usually garnering $7-12 CPM. In addition, it also selectively uses overlay ads from Google AdSense. Setting the ad strategy to maximize revenue is key. As Dan noted, staffing and managing an internal sales team in this highly competitive environment is a challenge that startup sites need to fully recognize.

Increasing video views is another key challenge. Acknowledging the limitations of search and on-site generated traffic, BobVila.com is ramping up an aggressive syndication effort. While offering lots of upside, Dan explains that this syndication will present new operational and financial complexities such as ensuring BobVila.com gets paid, content is distributed where and when it should be, enforcing various rights issues, etc. Dan pointed out the importance of having a solid technology partner (BobVila.com used PermissionTV) which enables syndication, flexible players and content management.

When you put it all together, it's clear that while broadband offers mid-tail providers like BobVila.com huge new opportunities, it also creates new challenges and responsibilities that many content providers have not typically dealt with. Surmounting these will determine how well these mid-tail providers ultimately fare.

Three exciting examples of how marketers are using broadband to drive their branding objectives recently hit my radar: Cartier, Campari and CIT.

Though the campaigns differ widely, they all strive to convey brand attributes by creatively using video. Interestingly, they also each use traditional print publications to drive awareness of their broadband efforts. This illustrates how important multi-platform marketing has become.

Cartier, the luxury products company, recently began re-promoting its mini-site supporting its "Love" line of jewelry. This campaign originally kicked off in '07 but I found it via a screen takeover ad at NYTimes.com. The mini-site includes 12 short videos from director Olivier Dahan (La Vie En Rose). Each video depicts a couple in various states of their relationship. Shot in black and white with low lighting and mood music, each evokes a luxurious sensibility that is consistent with the Cartier brand and "Love" line. Though purely entertaining, they create an engaging experience that would be impossible to replicate in traditional 30 second TV ads.

Meanwhile, Campari, the Italian liquor, is re-promoting its "Hotel Campari" min-site featuring Salma Hayek. I previously wrote about this last July, and once again found out about the site through an ad in The New Yorker magazine. Campari uses a more overtly seductive approach than Cartier, featuring Ms. Hayek gliding down a hallway ignoring all kinds of enticements until settling on a Campari on the rocks. The video nicely supports Campari's exclusive positioning, introducing the brand to audiences via the well-known, yet still-exotic actress. With liquor ads barred from TV, Campari is making great use of the unregulated broadband medium.

Lastly, there's CIT, the financial services giant, which has updated its "CIT: Behind The Business" video interview series with leading business executives. This first caught my eye last November, and the current interview with Jon Luther, Chairman and CEO of Dunkin' Brands is promoted via a 4-page insert also in the latest New Yorker edition. CIT differentiates itself by promoting how it brings "knowledge, expertise and creativity" to its client relationships. The interview series supports that positioning perfectly by eliciting insights in a low-key, yet engaging manner. Though clearly not as eye-catching as Cartier's and Campari's videos, CIT's videos and serialized nature serve its brand well.

These three campaigns show how broadband video continues to be used by savvy brands to better engage their target audiences. They also demonstrate how entertainment programming and brand marketing continue to converge. I expect more of this to come.

The stampede into broadband-only comedy shorts continued yesterday with Sony launching "C-Spot". The six short series will run on Sony's Crackle.com, YouTube, AOL Video, Hulu, Verizon Wireless' VCAST and others likely to come.

Comedy has been such a popular genre online because it is cheap to produce, easy to digest in short bursts and doesn't require story narratives to be compelling. What we've seen to date largely appeals to the young male demo which can't seem to get enough of the gross-out or sophomoric skits or hot ladies delivering goofy laugh lines.

I sampled a few of C-Spot's new programs and while I won't pretend to be a professional reviewer, I did find them to be a cut above some of the average comedic fare I've found elsewhere. Plus I think Sony's onto something by serializing these shorts and releasing new episodes on specific days of the week.

Though broadband is truly an on-demand medium, I continue to believe that audience-building requires habituation that is only driven by regularly-scheduled new releases. Prom Queen (though not a comedy) met with success by serializing, and I've been surprised there haven't been more imitators to date.

Regardless of format, I'm expecting comedy will remain the broadband medium's hottest genre, attracting indies and established players alike.

In a startling development, VideoNuze has confirmed that The Walt Disney Company has decided to sell its ABC television network to Apple CEO Steve Jobs, who is also Disney's largest individual shareholder. Disney is planning to devote most of the billions in proceeds to developing broadband-delivered video webisodes.

The sale, which was unexpected, is certain to ripple throughout the entire media and technology landscape. It is a highly unorthodox transaction that experts believe will be heavily challenged by other Disney shareholders who will claim the deal exceeded CEO Bob Iger's individual authority.

The deal was concluded following a high-stakes poker game held at Iger's Brentwood, CA mansion on Saturday night, in which Jobs and other media and technology industry heavyweights participated. Though the Iger-Jobs relationship has been described publicly as cordial, apparently a series of raises, bluffs and too many scotches laid bare a simmering rivalry between the two moguls.

VideoNuze has learned that with no limits in place, the two CEOs became embroiled in a titanic game of 7 card stud, leading to a round of ante raising that left other players - who had long since folded - gasping. With their chips exhausted, Iger is said to have wagered his double titanium American Express card with a $1 million dollar limit, only to be matched by Jobs placing his unique gold-plated iPhone (believed to work on a private AT&T Wireless frequency that AT&T granted to Jobs in order to gain the lucrative iPhone exclusive) on the table.

Within minutes Jobs further raised the ante by offering up all of his Apple shares. Unable to see the multi-billion dollar raise, Iger and Jobs were able to shake hands on a preliminary deal, allowing Iger to throw ABC into the pot, seeing Jobs's Apple shares. When Jobs revealed 4 aces to Iger's 4 kings, the lawyers were summoned to begin papering the deal.

Explaining what will surely be viewed as a rash move, Iger is said to have told Disney executives that from a strategic perspective his bet in fact made sense. His rationale: that the first month of results from Stage 9, Disney's new digital studio provided him ample data that broadband-delivered video was worthy of its hype and that he wanted to go "all in" with a multi-billion dollar commitment. That thinking left Wall Street observers stunned, as the only Stage 9 program that has launched to date is the comedy short, "Squeegees." The program has garnered several hundred thousand views on YouTube, but has generated no revenue.

Commenting on the deal, VideoNuze's Will Richmond said "Look, I've been saying for years that broadband video was going to remake the media landscape and take over the world, but I just can't believe Iger could have lost ABC to Jobs in a poker game." He continued, "I can only conclude the whole episode is just an April Fool's Day joke."

As I mentioned at the end of February, each month I plan to step back and recap a few key themes from recent VideoNuze posts. Here are three from March '08. (And remember you can see all of March's broadband news, aggregated from across the web, by clicking here)

The Syndicated Video Economy: An Introduction

In March I introduced the concept of the "Syndicated Video Economy" ("SVE") to describe how the broadband video providers are increasingly coalescing on a strategy for widespread distribution of video through myriad outlets. In the SVE media companies shift their focus from "aggregating eyeballs" in a centralized destination to "accessing eyeballs" wherever (and whenever) they live. The SVE is a big departure from traditional tightly-controlled, scarcity-driven distribution approaches. Investors have responded by funding SVE-oriented content and technology startups.

In March I provided several examples of SVE initiatives. CBS launched its Local Ad Network to distribute content to local bloggers and web sites. 60Frames, a new broadband studio, is explicitly focused on partnerships for distribution, and is not even building destination web sites for its programs. And FreeWheel is developing management tools so that content can be optimally monetized across a content provider's sprawling network of syndication partners.

The SVE resonated strongly with VideoNuze readers; many are focused on it and vested in its further development. Expect to hear a lot more about the SVE from me in coming posts. I'll also have supporting slides I'm developing for upcoming webinars on the topic.

Over-the-Top: Getting Broadband Video to the TV

Bringing broadband video all the way to the TV by bypassing existing service providers (so-called "over-the-top") continues to be the big elusive prize for many. This past month YouTube and TiVo announced a partnership to let a subset of TiVo owners gain full YouTube access on their TVs, a welcome move.

Following that, in "YouTube: Over-the-Top's Best Friend" I suggested the YouTube, with its dominant market position and brand loyalty could in fact be the linchpin to over-the-top devices gaining a foothold with consumers. Google-YouTube executives' vision for YouTube as a video platform, powering experiences wherever they are, lends support to my proposition. Lastly on over-the-top, new contributor Michael Greeson, founder of market researcher TDG, proposed that adapting low-cost devices like DVD player may well be the best way to bridge broadband and TV.

Social media and video: 2 sides of the same coin

This past month also continued an escalation of interest in the intersection of social media and broadband video. At the Media Summit there was intense focus on engagement, and how broadband can uniquely create new user experiences that deeply involve the user. These social experiences include sharing, personalization, commenting, rating and so on. In this vein, Maginfy.net introduced new social features to support its specialized user-created channels, a smart evolution of its product.

And in a follow-up to "The Intersection of UGC and Brand Marketing?" I clarified the opportunities that brand marketers may or may not have to get involved with this hot space. For those interested in more on this subject, new VideoNuze sponsor KickApps provided an informative webinar which is still available here.

So that's March's recap. There will be plenty more on all of these and other broadband video topics in April and beyond!

Over the next few weeks I'll be doing a series of posts on broadband video advertising's key opportunities and challenges, based on briefings with industry players. Advertising has increasingly become the industry's business model of choice, so understanding its future development is critical.

Just as there are advertising networks for Internet display or banner advertising, there are now a number of independent ad networks dedicated to broadband video advertising. These ad networks perform a crucial role in aggregating and selling inventory, creating efficiencies for both publishers and advertisers alike. These are particularly critical functions given how fragmented video is online.

I recently had a chance to catch up with Tod Sacerdoti, CEO/co-founder of BrightRoll, a big independent video ad network, who's in the trenches every day and is as knowledgeable as anyone about today's market and key challenges. BrightRoll is focused on building a network of high-quality publishers offering advertisers full transparency about which sites their ads run on. It is flexible to support all formats, players and units and has served over 1 billion ads to date.

Though BrightRoll just introduced an HD in-banner ad unit, it generally shies away from pioneering new formats, leaving it to publishers to drive the market. Tod believes that technical leadership will be a key differentiator and so BrightRoll builds all its own technology in-house.

For ad networks, the size and quality of their publisher network is obviously critical. BrightRoll's sweet-spot are premium branded sites that it can sell for around $15-25 CPM. This is the middle part of the market, below the "super-premium" sites but above the vast amount of user-generated video which is tough to sell.

Tod breaks down the market's current 10 billion streams/mo. Of the 40% non-YouTube videos, about half of the streams are monetizable, yielding about 2 billion streams. Tod thinks about half of these are sold. Two reasons for such a high unsold ratio are that many premium sites are maintaining minimum CPM requirements and because there are usage spikes that create unsold inventory. One of BrightRoll's key goals is to get the "unsold" server call from premium sites which want to maximize yield on usage spikes.

From Tod's standpoint a big challenge remains lack of standards, and therefore the reluctance of big publishers to fully integrate with ad networks. The IAB has been focusing on video standards which are expected soon. I have thought for a while that broadband video advertising will be driven by big brands diverting budget from TV ad spending. This contrasts with search, where Google in particular has relied on tens of thousands of smaller, ROI-focused advertisers. Tod sees it the same way and therefore is focused on driving high-quality online reach that brands require, along with reliable tracking and reporting.

I am pleased to welcome Michael Greeson's second contribution to VideoNuze. Michael is president of The Diffusion Group, a leading analytics and advisory firm helping companies in the connected home and broadband media markets.

Words Matter: Rethinking Messaging for Home Networks

Michael Greeson, President, The Diffusion Group

Since its arrival in the consumer market earlier this decade, the home network has been envisioned as a linchpin for the delivery of all types of IP-based residential services including video, data, entertainment, control, and communications. Despite this lofty vision, however, home network diffusion has fallen far short of expectations. Why has this happened?

For mainstream consumers, the phrase "home network" still spurs comments such as "never heard of them," "sounds too complex for me," or (worst of all) "don't see much value in having one." So how can these perceptions be changed? Here are a few thoughts that, while far short of being exhaustive, are no doubt relevant to this discussion.

(1) Ease-of-use must be a common property of every device and service. We've been talking about plug-and-play forever yet we're light-years away from making it a reality. A "solid-state experience" is essential to mainstream diffusion, meaning that home networks must be as easy to connect and use as yesterday's consumer electronics.

(2) There must be a compelling array of benefits uniquely enabled by home networking such that consumers feel they must have one. In this area, bridging broadband video directly to the TV could be particularly valuable.

(3) Market messages must reject the language of networking - in other words, stop calling it a "home network."

This last aspect is especially important, for regardless of how the technology and cost structures improve, if marketers aren't crafting their messages in language that speaks to consumers, all this innovation is for naught. To give you an example of just how important the issue of messaging is for the future of home networks, consider the following. During a recent national survey we conducted, consumers were informed of what a home network is and does (and in very simple language), then asked how likely they would be to purchase a home network in the next six months. The phrase "home network" was used three separate times in the description. The result? Only 11.1% expressed any degree of interest, with only 4.4% being highly or extremely likely to purchase.

Right after this first question, we asked their interest in purchasing a solution that enabled them to wirelessly connect their desktop and notebooks PCs to the Internet from any room in their home - we didn't use the phrase "home networking" nor did we explain in any detail the virtues of owning a home network. We simply asked about the likelihood that they would purchase a "wireless Internet solution" sometime in the next six months. The results? More than 54% expressed an interest in purchasing, with 36% being highly or extremely likely to purchase. That's a five-fold increase in total interest and an eight-fold increase in high levels of interest - simply by removing the phrase "home network" and focusing on one particular application that we believed to be of primary importance to today's consumer.

Think of it this way: I might have no interest in a home network (assuming I actually know what a "home network" is and does), but I am extremely interested in an inexpensive, easy-to-set/easy-to-use solution that allows me to wirelessly connect to the Internet regardless of where I am in my home. This may be particularly true for mainstream apps like video.

Whether in marketing CE devices or political candidates, sometimes we need to be reminded of just how much words do matter.

Click here to learn more about TDG's new report, "The Future of Home Networks"